Brand Building With A Better Offer

My friend and colleague Erik du Plessis once observed to me that “survival of the fittest” was really a misnomer and that it should be “death of the least fit.” As he noted, the lion gets up every morning knowing that it just needs to be faster than the slowest buck, and the buck wakes up knowing it just needs to be faster than the slowest in its herd.

His comments are entirely relevant to the analysis presented by Chemi in Bloomberg Businessweek. Companies and brands do not need to be the best in their industry to survive, they simply need not to be the worst. However, another factor not considered by Chemi’s analysis was price. If a brand wants to command a price premium it needs to offer a better than average experience and be seen as different in a good way.

If all the companies in a product or service category are viewed badly by consumers, then it may not matter if they are dissatisfied with their current choice since they have no obvious alternative. Lacking alternatives they simple have to tough it out, getting more disgruntled and resentful the longer the poor experience continues. Particularly where service contracts or annual fees are involved, people will have limited opportunities to switch and prior experience of changing provider may prove painful and futile. Of course, from the company viewpoint it is a great business model to have customers who feel trapped and feel they have nowhere to go. You can squeeze as much profit out of them as possible… until, that is, someone comes up with a better offer.

For many people the better offer will be a better price. I commented last year on the way that T-Mobile challenged the telecom status quo by offering consumers a better deal than they had been used to. I understand that AT&T is now offering $450 in credit to “bribe” specific T-Mobile customers to take advantage of AT&T’s 4G network. I suspect AT&T is betting that behavioral economics are on its side and many will take the deal even though it may not work to their advantage in the long term. However, I can’t help but suspect it signals that T-Mobile’s offer has given the industry giant pause for thought.

For other people the better offer will be a better product. Unlike price, however, it takes time for people to realize that there might actually be a better product or service out there. Let us take the example of Apple. Steve Jobs is reputed to have said:

“Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected.”

Jobs focus on quality and design is well-known now. However, it took several years after his return to Apple before the brand’s customer satisfaction scores started to reflect his commitment to quality. According to The American Customer Satisfaction Index, HP rated better than Apple computers for several years after Jobs took over. Today, however, Apple is rated nine points higher and the most valuable global brand in the world.

Companies may compete directly for investor dollars, but when it comes to customer dollars then it is the relative standing of other brands in the competitive set that matters most So what do you think? When does customer satisfaction really matter?

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